Keep Your Home California (Read the Fine Print)

The federally funded ‘Keep Your Home California’ Program will soon begin efforts to help distressed homeowners. The federal agency that oversees Fannie Mae and Freddie Mac has hesitated to approve the program passing yet sees this as a way to provide a sustainable mortgage payments.

The program is financed by the Hardest Hit Fund to help distressed homeowners get a principal reduction of up to $100,000 apiece on Freddie and Fannie loans. Though it may seem there is a change of heart by the regulators who were first against the program, it appears they know what they are doing. As stated by Freddie Mac, they see the program as more of a “principal curtailment.” Freddie Mac spokesman Brad German says, “We don’t consider it (principal reduction) in a way that is commonly understood. We are not writing off some percentage of the amount owed. We are simply accepting funds … through this program to allow it to be applied to unpaid principal or arrearage.” Freddie’s sister company Fannie Mae spokesman Andrew Wilson says, “This in fact for us is not a principal reduction. It’s a principal payment. It’s as if your grandmother wanted to give you $50,000 to apply to your mortgage. In this case, the grandmother, as it were, was the Hardest Hit Fund.”

The fund was set up in 2010 to provide $17 billion in homeowner assistance to 18 states hardest hit by the housing crisis. The California Housing Finance Agency set up four programs under the Keep Your Home name to distribute California’s share ($1.9 billion). It allocated $772 million to principal reduction which is enough to help an estimated 9,000 borrowers in California. The other programs are geared to assist unemployed homeowners as well as take care of relocation for the ones who are in foreclosure or short sale. While the program is ready to roll out and begin assistance, most are checking their pay stubs to know where the funds originated in order to help all these Californians.

There are a few qualifications to be met in order for California homeowners to be eligible for assistance.

Homeowner must currently live in the home

Owe more than the market value

Show low or moderate income

Homeowner should be delinquent or have hardships

Balance of 1st Mortgage cannot exceed $729,750

Here is the catch: This is a forgiven loan in five years time which means the homeowner has the option to sell within five years but if they gain any profits up to the $100,000 loan, it will have to be re-paid in full. After the five years, no repayment will be required. There’s more where that came from.

Homeowners are beginning to inquire with their lenders in regards to the program but are still considering a short sale as their better way out. However, many big banks in California are working to understand all ends of the program in order to decide whether or not to move forward as yet.

Contact one of our specialists and they can share more about what your options are. It’s better to have clarity on the fine print then get stuck in another rut.